By TIOL News Service

MUMBAI, FEB 11, 2016: THE appellant is engaged in the manufacture of embroidery fabrics falling under Chapter 5805.19. The duty liability on embroidery was discharged under compound levy scheme up to 31.03.2003 and at the rate of 10% BED + 15% AED from 01.04.03 onwards.

Vide Notification no. 25/2003-CE (NT) dated 25.03.2003, CCR were amended and the facility of Cenvat Credit was extended to textiles covering Chapter 50 to 62. The quantum of Cenvat Credit allowed to be availed was prescribed by Notf. 35/2003-CE(NT) dated 10.04.2003 which was later amended by Notfn. 47/2003-CE(NT) dated 17.05.2003.

The appellant calculated the permissible Credit as per the first Notification 35/2003-CE(NT) and furnished all the details of availment along with the monthly return in form ER-1 to Supdt., Central Excise, vide letter dated 06.05.2003 i.e. prior to issuance of second Notification no. 47/2003-CE (NT). Later, the Supdt. informed the appellant vide letter dated 26.08.2003 that the appellant have not correctly availed the Cenvat Credit. The appellant accepted the contention and immediately reversed Cenvat Credit on 30.08.2003.

The same fact was also pointed out by the audit party and thereafter a SCN came to be issued on 28.03.2008 seeking appropriation of the amount paid and imposition of penalty and interest.

The Commissioner (A) upheld the order of the adjudicating authority imposing penalty/interest and, therefore, the appellant is before the CESTAT.

It is submitted that there is no deliberate /willful attempt to avail Cenvat Credit wrongly; that erroneously availed Cenvat Credit was never utilized; there was always Cenvat Credit balance in the books of accounts; SCN is barred by limitation.

The AR justified the order of the lower authorities.

The Bench observed -

"7. From the facts and circumstances, I find that there is no suppression of any fact or any willful misstatement made by the appellant so as to justify invoking the extended period of limitation, and further the appellant has admitted his mistake and reversed the Cenvat Credit. Further, the contention of the appellant that notification clarifying the earlier notification was not published when he availed the Cenvat Credit; this may be a bonafide mistake on account of which he has availed Cenvat Credit. Therefore, in such a situation, in my considered view, the appellant is not liable to penalty. But the appellant is certainly liable to pay interest on the said amount as per the rate applicable under the provisions of the Section 11AB of the Central Excise Act, 1944. Therefore, I partly allow the appeal by setting aside the penalty imposed on the appellant and I hold that the appellant is liable to pay interest from the date he availed the Cenvat Credit till he reversed the same as per the provisions of Section 11AB of the Central Excise Act."

The appeal was partly allowed.

(See 2016-TIOL-389-CESTAT-MUM)